The Need For Money Transmitter Licenses Increases as Our Online World Evolves

As we hurl down the Internet’s information super highway at increasingly dizzying speeds, it is hard to take the time to recognize the monumental changes occurring in the surrounding landscape.  I’m not ashamed to admit that I remember life before the Internet and I am certain that almost everyone would agree with me that the Internet and the social media age that it has spawned has changed pretty much everything in how we live our lives.  For instance, how we purchase and pay for just about everything has changed.  We can buy anything from anywhere at any time of the day or night without even leaving our homes.  As an accomplished armchair shopper, I have to admit it’s wonderful but do you ever stop to think about the logistics of all that money and payment information floating around in cyberspace?

If you are a payment processing company, or even a company like Facebook or one of the many Internet companies that match up people who want to buy with people who have something to sell, then you should be very cognizant of the changing payment landscape.  These advances in commerce and payment have created vulnerabilities in money laundering, identity theft, terrorist financing and other illicit activities.  Government regulators are racing to catch up and amend old laws or draft new ones to encompass these new technologies and the attendant new threats.

Traditionally, payment processing companies that handle payments from customers to merchants have viewed their activities as a type of “data processing” outside the scope of actual money transmission, subject to regulation.  On the federal level, the Financial Crimes Enforcement Network has agreed with this conclusion and such companies have not been held to the requirements of the Bank Secrecy Act.  However, on the state level, this area is rapidly evolving and may become a compliance hotbed in the very near future.  Just last year, California enacted a sweeping new money transmission law that significantly broadens the definition of “money transmission” to leave no doubt that the new mobile payment applications and payment platforms are included.  All companies whose activities fall within this broad definition will be required to obtain a California money transmitter license.  As for the other states, 46 of them already have money transmitter laws that could be easily broadened to the same degree as California.  In fact, some companies are trying to get ahead of the curve and are obtaining money transmitter licenses now.  Facebook has already obtained money transmitter licenses in about 15 states and Square Inc. applied for its California license last April.  It may be a brave new world, but chances are you’re going to need a license.


*The information contained herein is intended for informational purposes only and does not constitute legal advice and is not intended to constitute advertising or solicitation for legal services.